The deal is expected to be finalised in the first quarter of 2014 and is subject to approval by Nokia's shareholders and regulatory approvals. Nokia partnered in 2011 with Microsoft and uses Microsoft's Windows software to run its mobile phones.

"It's a bold step into the future – a win-win for employees, shareholders and consumers of both companies," said Microsoft's outgoing chief executive, Steve Ballmer.

"Bringing these great teams together will accelerate Microsoft's share and profits in phones, and strengthen the overall opportunities for both Microsoft and our partners across our entire family of devices and services."

Nokia said in a statement it expected that Elop, along with senior executives Jo Harlow, Juha Putkiranta, Timo Toikkanen, and Chris Weber, would transfer to Microsoft when the deal was concluded. It did not say what roles they would take at Microsoft.

Elop, a Canadian hired by Nokia in 2010 from Microsoft, has been one of the favourites to take over as Microsoft chief when Ballmer steps down.

Nokia said its board chairman, Risto Siilasmaa, would take over CEO duties while the firm looked for a new CEO."